SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
AMERICAN HOME PRODUCTS CORPORATION
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
.................................................................
2) Aggregate number of securities to which transaction applies:
.................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
.................................................................
4) Proposed maximum aggregate value of transaction:
.................................................................
5) Total fee paid:
.................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.................................................................
2) Form, Schedule or Registration Statement No.:
.................................................................
3) Filing Party:
.................................................................
4) Date Filed:
.................................................................
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
__________
Notice of Annual Meeting
and
Proxy Statement
__________
Annual Meeting of Stockholders
April 23, 1996
_______________________________________________________
YOUR VOTE IS IMPORTANT
If you are unable to attend the meeting, please date, sign
and return the accompanying proxy card promptly.
_______________________________________________________
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
Five Giralda Farms
Madison, New Jersey 07940
__________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
__________
The Annual Meeting of the Stockholders of AMERICAN HOME PRODUCTS
CORPORATION will be held in Salon E of the Marriott Hotel, 1401 Route 10 East,
Whippany, New Jersey on Tuesday, April 23, 1996 at 10:00 a.m., local time, for
the following purposes:
l. to elect a Board of eleven directors;
2. to consider and act upon the ratification of the appointment of
Arthur Andersen LLP as the Corporation's principal independent
public accountants for 1996;
3. to consider and act upon amendments to the Corporation's Restated
Certificate of Incorporation to increase to 1,200,000,000 the
number of authorized shares of Common Stock and a related matter;
4. to consider and act upon adoption of the 1996 Stock Incentive
Plan; and
5. to act upon such other matters which may properly come before the
meeting.
Under the provisions of the By-Laws, the Board of Directors has fixed
the close of business on March 15, 1996 as the record date for the
determination of stockholders entitled to notice of and to vote at the
meeting.
By Order of the Board of Directors
Carol G. Emerling
Secretary
March __, 1996
____________________________________________________
YOUR VOTE IS IMPORTANT
If you are unable to attend the meeting, please date, sign
and return the accompanying proxy card promptly.
____________________________________________________
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
Five Giralda Farms
Madison, New Jersey 07940
__________
PROXY STATEMENT
Your proxy in the form enclosed is solicited by the Board of
Directors and Management of American Home Products Corporation
(the "Corporation") to be used at the Annual Meeting of
Stockholders to be held on April 23, 1996 and at any adjournment
or adjournments thereof. Properly executed proxies received
prior to the meeting will be voted at the meeting. Stockholders
may have their votes kept secret until after the Annual Meeting
by so indicating in the designated place on the proxy card. If a
stockholder specifies how the proxy is to be voted on any
business to come before the meeting, it will be voted in
accordance with such specifications. If no specification is
made, it will be voted in accordance with the recommendations of
the Board of Directors and Management which are FOR the election
of the directors named in this Proxy Statement, FOR ratification
of the appointment of Arthur Andersen LLP as the Corporation's
principal independent public accountants for 1996, FOR adoption
of the amendments to the Restated Certificate of Incorporation
and FOR approval of the 1996 Stock Incentive Plan. The proxy may
be revoked by you at any time before it is voted at the meeting.
Attendance at the meeting will be limited to stockholders of
record on March 15, 1996 or their proxies, beneficial owners
having evidence of ownership on that date, and invited guests of
the Corporation. No cameras or recording equipment will be
permitted in the meeting room.
This Proxy Statement and accompanying form of proxy are
first being sent or given to stockholders on or about March __,
1996.
If a stockholder participates in the Corporation's Master
Investment Plan, a proxy to vote shares registered in his or her
own name will serve as instructions on how to vote shares held in
custody for the stockholder pursuant to the Plan. No further
action from the stockholder is required to vote the shares in the
Master Investment Plan. Accordingly, as Transfer Agent for
shares of the Corporation's common stock, par value $.33 1/3 per
share (the "Common Stock") Chemical Mellon Shareholder Services
will cause shares held in the name of its nominee for the account
of stockholders participating in the Master Investment Plan to be
voted in the same way as such stockholders vote shares registered
in their names. If the stockholder does not send a proxy to vote
the shares registered in his or her own name, the shares held for
his or her account in the Master Investment Plan will not be
voted.
Stockholders of record at the close of business on March 15,
1996 are entitled to notice of and to vote at the meeting. On
March 1, 1996, there were outstanding and entitled to vote
_____________ shares of Common Stock (each of which is entitled
to one vote) and _______ shares of $2 Convertible Preferred Stock
(each of which is entitled to nine votes). A plurality of the
votes cast by the holders of Common Stock and $2 Convertible
Preferred Stock, voting as a single class, is required for
election of directors, a majority of the votes cast by such
holders, voting as a single class, is required for ratification
of the appointment of the principal independent public
accountants, a majority of the outstanding Common Stock and $2
Convertible Preferred Stock, voting as a single class, is
required for adoption of the amendments to the Restated
Certificate of Incorporation and a majority of the votes cast by
such holders, voting as a single class, is required for approval
of the 1996 Stock Incentive Plan. The aggregate number of votes
cast by all stockholders present in person or by proxy at the
meeting will be used to determine whether a motion will carry,
except in the case of the adoption of the amendments to the
Restated Certificate of Incorporation which require a majority of
the outstanding Common and $2 Preferred Stock, voting as a single
class. Thus, in the case of the election of directors and the
ratification of the appointment of the principal independent
public accountants and other matters that may come before the
meeting, an abstention from voting on a matter by a stockholder
present in person or by proxy at the meeting has no effect on the
item on which the stockholder abstained from voting. However, in
the case of the approval of the 1996 Stock Incentive Plan and the
adoption of the amendments to the Restated Certificate of
Incorporation, an abstention will be counted as a "no vote". In
addition, although broker "non-votes" will be counted for
purposes of obtaining a quorum, they will have no effect on the
vote on matters at the Annual Meeting except that, for the
proposal to amend the Restated Certificate of Incorporation, they
will have the same effect as a vote against the proposal.
ITEM l.
ELECTION OF DIRECTORS
Eleven directors are to be elected to hold office until the
next Annual Meeting of Stockholders and until their successors
have been duly elected and qualified. If the proxy is executed
in such manner as not to withhold authority for the election of
any or all of the nominees for directors, then the persons named
in the proxy will vote the shares represented by the proxy for
the election of the following eleven nominees. If the proxy
indicates that the stockholder wishes to withhold a vote from one
or more nominees for directors, such instructions will be
followed by the persons named in the proxy. All of the nominees
are now members of the Board of Directors and were elected by the
stockholders at the last Annual Meeting. Management has no
reason to believe that any of the nominees will not serve. In
the event that any nominee should not be available, and if the
Board has designated a substitute nominee, the persons named in
the proxy will vote for the substitute nominee designated by the
Board of Directors.
Nominees For Election As Directors
Year Each Became a Director, Age, Positions,
Principal Occupation, Business Experience,
Name of Nominee Other Directorships
________________________________________________________________
(photo) Director since 1993; age 62; President of
Alexander & Associates, Inc. (consulting
firm specializing in Workforce
Inclusiveness); Director, Dreyfus General
Family of Funds, Dreyfus Third Century Fund,
Dreyfus Premier Family of Funds, Dun and
Bradstreet Corporation, MCI Communications
Corporation, and Mutual of America Life
Insurance Company; member of the Audit,
Corporate Issues and Nominating Committees
Clifford L. Alexander, Jr.
(photo) Director since 1988; age 63; President and
Chief Executive Officer of The Hearst
Corporation (owns and operates
communications media); Director, Chemical
Banking Corporation; Chairman of the
Compensation and Benefits Committee and
member of the Executive and Nominating
Committees
Frank A. Bennack, Jr.
(photo) Director since 1990; age 57; Senior
Executive Vice President of the Corporation
since October 1995; previously Executive
Vice President from 1987; member of the
Executive Committee of the Board and of the
Finance, Operations and Retirement
Committees of the Corporation
Robert G. Blount
<PAGE>
Nominees For Election As Directors
Year Each Became a Director, Age, Positions,
Principal Occupation, Business Experience,
Name of Nominee Other Directorships
________________________________________________________________
(photo) Director since 1975; age 72; National Chair,
Population Action International; Director,
International Flavors and Fragrances, Inc.;
member of the Compensation and Benefits and
Nominating Committees
Robin Chandler Duke
(photo) Director since 1987; age 59; Dean, Fordham
University School of Law since 1982;
Director, Sentinel Group Funds, Inc. and
Sentinel Pennsylvania Tax Free Trust; member
of the Audit and Nominating Committees
John D. Feerick
(photo) Director since 1995; age 50; Executive Vice
President of the Corporation since October
1995; previously Senior Vice President from
1993; Group Vice President, 1993; President
of Wyeth-Ayerst Laboratories, 1989 to 1993;
Director, Genetics Institute, Inc.; member of
the Finance, Operations and Retirement
Committees of the Corporation
Fred Hassan
(photo) Director since 1995; age 56; Consultant;
retired Chairman and Chief Executive Officer,
The Continental Corporation (an insurance
holding company); Director, Chemical Banking
Corporation, Business Men's Assurance
Corporation and Hallmark Cards, Inc.; member
of the Compensation and Benefits and
Nominating Committees
John P. Mascotte
<PAGE>
Nominees For Election As Directors
Year Each Became a Director, Age, Positions,
Principal Occupation, Business Experience,
Name of Nominee Other Directorships
________________________________________________________________
(photo) Director since 1995; age 52; Chairman and
Professor, Department of Obstetrics and
Gynecology, Stanford University School of
Medicine since 1990; Director, Gynecare,
Inc., Metra Biosystems, Inc. and Quidel
Corporation; member of the Corporate Issues
and Nominating Committees
Mary Lake Polan, M.D., Ph.D.
(photo) Director since 1980; age 58; Chairman of the
Board, President and Chief Executive Officer
of the Corporation since 1986 (except for
period between May 1990 and January 31, 1994
when he did not have additional title of
President); Director, AlliedSignal Inc.,
Chemical Banking Corporation, Metropolitan
Life Insurance Company and NYNEX Corporation;
Chairman of the Executive and Nominating
Committees of the Board and Chairman of the
Finance, Operations and Retirement Committees
of the Corporation
John R. Stafford
(photo) Director since 1982; age 56; Chairman, Torell
Management Inc. (financial advisory company);
Chairman, Telesphere, Inc. (financial
information provider); former Chairman and
CEO, Fortune Bancorp; former Chairman of the
Board, President and Chief Executive Officer
of CalFed Inc.; former President, Manufac-
turers Hanover Corporation and Manufacturers
Hanover Trust Company; Director, Volt
Information Sciences, Inc. and various
investment companies for which PaineWebber,
Inc. serves as investment advisor; Chairman
of the Audit Committee and member of the
Nominating Committee
John R. Torell III
<PAGE>
Nominees For Election As Directors
Year Each Became a Director, Age, Positions,
Principal Occupation, Business Experience,
Name of Nominee Other Directorships
________________________________________________________________
(photo) Director since 1981; age 63; President, Chief
Executive Officer and member of the Board,
Wm. Wrigley Jr. Company (international
manufacturer of chewing gum products);
Director, Texaco, Inc.; Chairman of the
Corporate Issues Committee and member of the
Nominating Committee
William Wrigley
Committees
The Board of Directors has, as standing committees, an Audit
Committee, a Compensation and Benefits Committee, a Nominating
Committee and a Corporate Issues Committee. Each such committee
consists solely of non-employee members of the Board except for
the Nominating Committee, of which Mr. Stafford is Chairman.
The Audit Committee, whose current members are Mr. Torell,
Chairman, and Messrs. Alexander and Feerick held two meetings in
1995. This Committee recommends the firm of independent public
accountants engaged each year as the Corporation's principal
independent public accountants, subject to the approval of the
Board of Directors and ratification by the stockholders, and
undertakes such reviews of the Corporation's financial affairs as
the Committee deems appropriate.
The Compensation and Benefits Committee, whose current
members are Mr. Bennack, Chairman, Mrs. Duke and Mr. Mascotte
held six meetings in 1995. This Committee recommends to the
Board the salaries of the officers of the Corporation and
administers the Corporation's Management Incentive Plan, Stock
Incentive and Stock Option Plans and other benefit plans.
The Nominating Committee, whose membership is composed of
all of the non-employee directors and Mr. Stafford as its
Chairman, held one meeting in 1995. This Committee recommends
the director-nominees contained in the proxy statement, considers
candidates for director vacancies and such other management
matters as may be presented to it by the Chairman. Stockholders
may submit names of qualified candidates along with detailed
information on their backgrounds to the Corporate Secretary for
referral to the Committee.
The Corporate Issues Committee, whose current members are
Mr. Wrigley, Chairman, Mr. Alexander and Dr. Polan, reviews the
policies and programs of the Corporation and makes
recommendations to the Board as appropriate on public issues that
affect the Corporation. It held three meetings in 1995.
The Board also has an Executive Committee which is
authorized, during the intervals between Board meetings, to
perform all duties and exercise all powers of the Board except
those that are required to be performed or exercised by the Board
acting as a whole. Its current members are Mr. Stafford,
Chairman, and Messrs. Bennack and Blount. It held one meeting in
1995.
Directors Fees; Attendance
Messrs. Stafford, Blount and Hassan were employees of the
Corporation for all of 1995 and therefore received no
remuneration for serving on the Board of Directors. The other
directors received an annual retainer of $39,000, a fee of $8,500
for Committee service and a meeting fee of $950 for each Board or
Committee meeting attended in 1995. The Chairman of a Committee
receives an additional fee of $3,000. There were 10 Board
meetings in 1995. The total fees paid in 1995 to the current
eight non-employee directors and four non-employee directors who
did not stand for re-election in April 1995 were $595,406.
In addition, each director who is not an employee or former
employee of the Corporation is entitled to receive an initial
grant of 200 shares of restricted stock and subsequent grants up
to a total of 1,000 shares of restricted stock over a period of
five years, subject to the terms and conditions of the 1994
Restricted Stock Plan for Non-Employee Directors.
During 1995, each member of the Corporation's Board of
Directors attended at least 75% of all meetings of the Board and
of each Committee of which such director was a member.
The Corporation has a cash deferral contract available to
all non-employee directors. Pursuant to such arrangement,
directors fees otherwise payable in the year earned may be
deferred in amounts specified by such directors. In 1995, no
non-employee director elected to defer compensation.
The Corporation has a retirement plan for outside directors.
For directors with 10 years of Board service who retire at or
after 65 years of age, or before age 65 in case of disability, it
provides an annual lifetime benefit in the amount of the annual
Board retainer in effect for the year for which the payment is
made. Directors who retire before age 65 with 10 years of Board
service may receive the benefit upon attaining age 65. Directors
who were formerly employees are also eligible for this retirement
benefit if they have 10 years of Board service, at least five of
which were as a non-employee director. If the director dies
before receiving at least five annual benefit payments, a lump
sum amount equal to the difference between five annual benefit
payments and the amount the director has already received will be
paid to the director's beneficiary.
Certain Transactions
On July 1, 1994, the Corporation entered into a consulting
agreement with Alexander & Associates, Inc., of which Mr.
Clifford L. Alexander, Jr. is President and of which Mr.
Alexander and his wife are each 25% owners. Under the agreement,
Alexander & Associates agreed to review the Corporation's
affirmative action plans, recruitment process and diversity
training programs in three phases over a three year period for a
total of $120,000.
SECURITIES OWNED BY MANAGEMENT
The table below reflects the numbers of shares of American Home Products
Corporation Common Stock beneficially owned as of February 1, 1996 by each
director of the Corporation and each named executive listed in the Summary
Compensation Table and the number of shares beneficially owned by all
directors and executive officers of the Corporation as a group.
All directors and named executives disclaim beneficial ownership of
shares owned solely by their spouses. No director or officer owns shares of
the Corporation's Preferred Stock.
<TABLE>
<CAPTION>
EXERCISABLE PERCENT
NAME OF BENEFICIAL OWNER COMMON STOCK OPTIONS OF CLASS
---------------------------- ------------ ----------- --------
<S> <C> <C> <C>
DIRECTORS
Clifford L. Alexander, Jr. ....... 1,600* **
Frank A. Bennack, Jr. ............ 3,500* **
Robert G. Blount.................. 14,604 (1) 41,500 **
Robin Chandler Duke............... 12,400* **
John D. Feerick................... 600* **
Fred Hassan....................... 10,405 (2) 154,100 **
John P. Mascotte.................. 1,400* **
Mary Lake Polan, M.D., Ph.D. ..... 500* **
John R. Stafford.................. 141,001 (3) 510,000 **
John R. Torell III................ 1,686* **
William Wrigley................... 23,854*(4) **
NAMED EXECUTIVES
Joseph J. Carr.................... 14,026(5) 41,600 **
Louis L. Hoynes, Jr. ............. 12,468(6) 61,600 **
All executive officers and directors as a group
(21 persons)...................... 290,202 1,150,100 0.46%
---------------
</TABLE>
* Includes 400 shares of restricted stock awarded under the 1994 Restricted
Stock Plan for Non-Employee Directors.
** Less than one percent (1%); includes exercisable options.
(1) Includes 500 shares owned by Mrs. Blount. Also includes
5,676 shares of common stock subject to certain restrictions
("Restricted Stock") held by a trust for the benefit of
certain executive officers of the Corporation under which
such officers have sole voting power with respect to the
shares they each beneficially own but do not have
dispositive power except in certain limited circumstances
(the "Restricted Stock Trust").
(2) Includes 6,157 shares held in joint tenancy with Mrs.
Hassan. Also includes 4,248 shares of Restricted Stock held
by the Restricted Stock Trust.
(3) Includes 8,160 shares owned by Mrs. Stafford and 9,857
shares of Restricted Stock held by the Restricted Stock
Trust.
(4) Includes 10,800 shares held in joint tenancy with Mrs.
Wrigley. Also includes the following shares (beneficial
ownership of which is disclaimed by Mr. Wrigley): 2,972
shares owned by a trust of which Mr. Wrigley is co-trustee,
along with Mrs. Wrigley, for the benefit of Mrs. Wrigley,
1,312 shares owned by two trusts of which Mrs. Wrigley is
co-trustee, 2,000 shares owned by a foundation of which Mrs.
Wrigley is an officer and 4,370 shares owned by Mrs.
Wrigley.
(5) Includes 1,428 shares of Restricted Stock held by the
Restricted Stock Trust.
(6) Includes 1,428 shares of Restricted Stock held by the
Restricted Stock Trust.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
The following table sets forth the compensation paid for the
years 1993 - 1995 to the Corporation's Chairman, President and Chief
Executive Officer and the four other most highly paid executive
officers.
Annual Compensation
-------------------------------------------------------
<CAPTION>
Form of Bonus Long Term
Payment (2) Compensation
----------------------- --------------------
Securities
Underlying
Base Total Contingent Options LTIP All Other
Salary Bonus Cash Shares Granted Payouts Compensation
Name and Principal Position Year ($)(1) ($)(2) ($) (#) (#)(3) ($)(4) (#)(5)
- --------------------------- ---- --------- --------- ------- ----------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John R. Stafford 1995 1,185,000 1,185,000 592,500 6,175 508,200 341,935 35,550
Chairman of the Board, Pres. 1994 1,112,500 1,112,500 556,250 8,746 120,000 - 33,370
and Chief Executive Officer 1993 1,085,000 1,085,000 542,500 8,359 135,000 - 32,550
Robert G. Blount 1995 628,250 628,250 314,125 3,273 228,800 196,897 18,848
Sr. Executive Vice President 1994 543,250 543,250 271,625 4,270 66,600 - 16,298
1993 530,000 530,000 265,000 4,083 75,000 - 15,900
Fred Hassan 1995 569,000 569,000 284,500 2,965 186,600 147,372 34,070
Executive Vice President 1994 492,000 492,000 246,000 3,867 50,000 - 31,010
1993 476,667 476,667 238,334 3,672 40,000 - 26,800
Louis L. Hoynes, Jr. 1995 407,000 407,000 203,500 2,120 47,200 49,525 12,210
Senior Vice President 1994 389,500 331,075 165,538 2,602 16,600 - 11,685
and General Counsel 1993 380,000 380,000 190,000 2,927 25,000 - 11,400
Joseph J. Carr 1995 350,500 350,500 175,250 1,826 56,600 49,525 10,515
Senior Vice President 1994 333,250 333,250 166,625 2,619 16,600 - 9,998
1993 325,000 325,000 162,500 2,503 25,000 - 9,750
</TABLE>
(1) Mr. Stafford deferred until after retirement portions of his 1995 and
1994 base salaries and his entire 1995 bonus pursuant to a deferred
compensation program.
(2) The total bonus and form of bonus payment in cash and contingent
shares under the Corporation's Management Incentive Plan are shown for
services rendered in the corresponding year. Under current policy of
the Compensation and Benefits Committee (the "Committee"),
participants in the Plan who are corporate vice presidents and above,
and all U.S. employees with a base salary of $175,000 or more may
request that up to 50% of the award for any year
<PAGE>
be paid as a cash award. All others may request that up to 100% of
the award be paid as a cash award. The remainder of the award for
each year is made as a contingent stock award which may be delivered
either in the third year following the year in respect of which the
award was granted, or after retirement or termination of employment.
Deliveries of contingent stock awards following retirement or
termination of employment will generally be made in five approximately
equal annual installments.
Shares of Common Stock which are contingently awarded to an employee
are credited to a contingent award account for the employee. No
shares of Common Stock are issued or earmarked for the employee's
account at the time of award, nor does he or she have any rights as a
stockholder with respect to the shares credited to the account before
actual issuance and delivery of such shares. The dividends which
would have been paid during a calendar year with respect to shares
credited to an employee's contingent award account, had the shares
then been outstanding, are calculated at the end of each year, and the
employee's account is then credited with the largest full number of
shares of Common Stock which such an amount of dividends could have
purchased at the average closing market price of the Common Stock for
the last five business days of the year. Any amounts remaining are
carried forward in the employee's account and applied to the
calculation of shares for that account at the end of the next year.
(3) In addition to the 1995 grants, on May 25, 1995 the Committee granted
to each of the named executive officers SARs in tandem with previously
outstanding stock options at the same exercise price per share as the
underlying option.
(4) Amounts shown represent the value (based on the closing market price
of the Common Stock) on the date of conversion of the portion of the
Restricted Stock Performance Awards made in 1994 under the
Corporation's 1993 Stock Incentive Plan (the "1994 Awards") which,
based on 1994 performance, was converted on February 7, 1995 to shares
of Restricted Stock. The 1994 Awards were composed of units subject to
conversion to shares of Restricted Stock based on the Corporation's
performance during the years 1994-1996. Following each such year,
each named executive officer may receive shares of Restricted Stock in
an amount equal to 0%-125% of one-third of the target number of units
subject to the 1994 Awards based upon the Corporation's performance in
such year. (The target number of units covered by the 1994 Awards for
each of the named executive officers was 14,500 for Mr. Stafford,
8,350 for Mr. Blount, 6,250 for Mr. Hassan, 2,100 for Mr. Hoynes, and
2,100 for Mr. Carr.) The amounts shown above represent 100% of
one-third of the target numbers of units which were converted to
Restricted Stock based on 1994 performance. During the three year
restricted period ending May 26, 1997, all of the units and Restricted
Stock will be forfeited upon termination of employment for any reason
other than death, disability or retirement (in which cases the
Restricted Stock will vest immediately and the units will continue to
be converted based upon satisfaction of the performance criteria),
unless otherwise determined by the Committee. The number of shares of
Restricted Stock beneficially held as of December 31, 1995 by each of
the named executive officers, including additional shares acquired
upon reinvestment of the dividends thereon (all of which shares relate
to the portion of the 1994 Awards converted in 1995), and the value
thereof as of such date are: Mr. Stafford, 4,833 shares ($468,801);
Mr. Blount, 2,783 shares ($269,951); Mr. Hassan, 2,083 shares
($202,051); Mr. Hoynes, 700 shares ($67,900); and Mr. Carr, 700
shares ($67,900). (All of such shares were contributed by the
Corporation to the Restricted Stock Trust, pursuant to which actual
delivery of such shares to the named executive officers is deferred
until after termination of employment.) For 1995 and 1996, conversion
to Restricted Stock is based on the achievement of a target level of
earnings per share ("EPS") in the same manner as described under the
Long-Term Incentive Plan Awards Table with respect to the 1995 Awards.
Based upon the Corporation's EPS for 1995, an additional 100% of
one-third of the target amount of the 1994 Awards was converted to
Restricted Stock in January 1996 and will be reported under the
caption "LTIP Payouts" in the Summary Compensation table in the 1997
proxy statement.
(5) Represents contributions made by the Corporation under its Savings
Plan and Supplemental Employee Savings Plan (the Corporation matches
up to 50% of the first 6% of compensation contributed by the
employee). The amount shown for Mr. Hassan includes $17,000 in
director's fees paid to him in 1995 by Genetics Institute, Inc., of
which the Corporation owns approximately 63% of the outstanding common
stock.
<PAGE>
OPTION/SAR GRANTS TABLE
<TABLE>
The following table provides information on Option/SAR grants in 1995
to the named executive officers.
<CAPTION>
Individual Grants in 1995
----------------------------------------------------------------
Number % of Total
Securities Options/SARs
Underlying Granted to Exercise Grant Date
Options/SARs Employees Price Per Expiration Present Value
Name Granted (1) in 1995 Shares ($)(5) Date ($)(6)
- ---- ------------ ------------ ------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
John R. Stafford 158,200 (2)
350,000 (3)
-------------
508,200 4.9% 76.2500 May 2005 6,442,200
Robert G. Blount 88,800 (2)
140,000 (3)
-------------
228,800 2.2% 76.2500 May 2005 2,907,200
Fred Hassan 66,600 (2)
120,000 (4)
-------------
186,600 1.8% 76.2500 May 2005 2,323,600
Louis L. Hoynes, Jr. 22,200 (2)
25,000 (4)
-------------
47,200 0.5% 76.2500 May 2005 591,900
Joseph J. Carr 26,600 (2)
30,000 (4)
-------------
56,600 0.5% 76.2500 May 2005 709,700
</TABLE>
(1) Grants to named executive officers in 1995 include SARs in tandem
with stock options.
(2) These options/SARs are not exercisable during the first year of
their term (except that such options/SARs may be exercised
earlier in the case of the optionee's retirement, disability or
death).
(3) These options/SARs become exercisable over a three year period.
One-third of these options/SARs become exercisable one year from
the date of grant, an additional one-third become exercisable two
years from the date of grant and the remaining one-third become
exercisable three years from the date of grant (except that all
such options/SARs may be exercised earlier in the case of the
optionee's disability or death).
(4) These options/SARs become exercisable three years from the date
of grant (except that all such options/SARs may be exercised
earlier in the case of the optionee's disability or death).
(5) The exercise price is the mean price on the date of grant.
(6) These estimates of value were developed solely for the purposes
of comparative disclosure in accordance with the rules and
regulations of the Securities and Exchange Commission and are not
intended to predict future prices of the Corporation's Common
Stock. The estimate was developed using the Black-Scholes option
pricing model incorporating the following assumptions:
Volatility of .1546 and dividend yield of 4.4%, both based on the
historical three year monthly average for the underlying Common
Stock; risk-free rate of return of 6.25% based on a ten-year zero
coupon rate; and time of exercise of 10 years, being the term of
the option/SAR grants. In addition, the model assumed a 3%
discount for forfeiture since the options/SARs become exercisable
at various future dates as set forth in Notes 2, 3, and 4 above.
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
<TABLE>
The following table provides information on Restricted Stock
Performance Awards granted in 1995, under the Corporation's 1993
Stock Incentive Plan, to the named executive officers.
<CAPTION>
Estimated Future Payouts under Non-Stock
Price-Based Plans
--------------------------------------------
Performance
Number of or Other
Shares, Units Period Until Below
or Other Maturation or Threshold Threshold Target Maximum
Name Rights (#)(1) Payout (#) (#) (#) (#)
- ---- ------------- ------------- --------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
John R. Stafford 4,950 1998 - 3,713 4,950 6,188
Robert G. Blount 2,800 1998 - 2,100 2,800 3,500
Fred Hassan 2,100 1998 - 1,575 2,100 2,625
Louis L. Hoynes, Jr. 700 1998 - 525 700 875
Joseph J. Carr 850 1998 - 638 850 1,063
</TABLE>
(1) Amounts shown represent Restricted Stock Performance Awards
the ("1995 Awards") made in 1995 under the Corporation's
1993 Stock Incentive Plan. These 1995 Awards are composed
of units which may be converted to a number of shares of
Restricted Stock equal to 0%-125% of the 1995 Award based
upon the Corporation's performance in 1997. The Target
amount will be earned if 96%-105% of the target EPS is
achieved; the Threshold amount will be earned if 90%-95% of
the target EPS is achieved; and the Maximum amount will be
earned if over 105% of the target EPS is achieved. During
the three year restricted period ending May 25, 1998, all
of the units and Restricted Stock will be forfeited upon
termination of employment for any reason other than death,
disability or retirement (in which cases the Restricted
Stock will vest immediately and the units will be converted
based upon satisfaction of the performance criteria),
unless otherwise determined by the Committee.
<PAGE>
OPTION/SAR EXERCISE AND YEAR-END VALUE TABLE
<TABLE>
The following table discloses the options that were
exercised by the named executive officers during 1995 and sets
forth the number and value of their unexercised options/SARs at
year-end. No SAR's were exercised in 1995.
<CAPTION>
Aggregated Option Exercises in 1995
And Year-End Option/SAR Values
---------------------------------------------------------
Number of Value of
Securities Underlying Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
Shares Dec. 31, 1995 (#) Dec. 31, 1995 ($)
Acquired on Value Exercisable* Exercisable*
Name Exercise (#) Realized ($) Unexercisable**(1) Unexercisable**(2)
- ---- ----------- ------------ ------------------ -------------------
<S> <C> <C> <C> <C>
John R. Stafford 75,000 (3) 2,237,535 510,000 * 17,535,938 *
508,200 ** 10,545,150 **
Robert G. Blount 195,100 (4) 4,194,074 41,500 * 902,719 *
228,800 ** 4,747,600 **
Fred Hassan - - 154,100 * 5,074,094 *
186,600 ** 3,871,950 **
Louis L. Hoynes, Jr. 50,000 (5) 1,470,400 61,600 * 1,869,176 *
47,200 ** 979,400 **
Joseph J. Carr 30,000 (6) 675,774 41,600 * 1,441,676 *
56,600 ** 1,174,450 **
</TABLE>
(1) On May 25, 1995, the Committee granted to each of the named
executive officers SARs in tandem with previously
outstanding stock options at the exercise price per share of
the underlying options.
(2) The amounts given are based on the closing market price of
the Corporation's Common Stock at December 31, 1995 which
was $97.00. The closing market price on March 1, 1996 was
[$ ].
(3) The option exercised was granted in 1989 at an exercise
price of $47.2188 per share (market value on date of grant).
(4) Represents exercises of options (i) granted in 1990 and
covering 15,000 shares at an exercise price of $51.7500 per
share, (ii) granted in 1991 and covering 40,000 shares at an
exercise price of $60.8750 per share, (iii) granted in 1993
and covering 73,500 shares at an exercise price of $65.1875
per share and (iv) granted in 1994 covering 66,600 shares at
an exercise price of $58.0625 per share (in each case,
market value on date of grant).
(5) Represents exercises of options (i) granted in 1990 and
covering 30,000 shares at an exercise price of $50.5625 per
share and (ii) granted in 1991 and covering 20,000 shares at
an exercise price of $60.8750 per share (in each case,
market value on date of grant).
(6) Represents exercises of options (i) granted in 1991 and
covering 15,000 shares at an exercise price of $60.8750 per
share and (ii) granted in 1992 and covering 15,000 shares at
an exercise price of $75.6250 per share (in each case,
market value on date of grant).
<PAGE>
PENSION PLAN TABLE
<TABLE>
The Corporation has two non-contributory defined benefit
retirement plans in which the named executives participate. One
of these plans is qualified under the applicable provisions of
the Internal Revenue Code (the "Qualified Plan"), and the other
is a non-qualified Supplemental Executive Retirement Plan
("SERP"). The total combined benefits payable under the
Qualified Plan and SERP to the named executives are determined on
the basis of a final 10-year average earnings formula.
<CAPTION>
Years of Service
Final 10-Year Average
Earnings 15 20 25 30*
<S> <C> <C> <C> <C>
$ 600,000 180,000 240,000 300,000 360,000
700,000 210,000 280,000 350,000 420,000
800,000 240,000 320,000 400,000 480,000
900,000 270,000 360,000 450,000 540,000
1,000,000 300,000 400,000 500,000 600,000
1,100,000 330,000 440,000 550,000 660,000
1,200,000 360,000 480,000 600,000 720,000
1,300,000 390,000 520,000 650,000 780,000
1,400,000 420,000 560,000 700,000 840,000
1,500,000 450,000 600,000 750,000 900,000
1,600,000 480,000 640,000 800,000 960,000
1,700,000 510,000 680,000 850,000 1,020,000
1,800,000 540,000 720,000 900,000 1,080,000
1,900,000 570,000 760,000 950,000 1,140,000
2,000,000 600,000 800,000 1,000,000 1,200,000
2,100,000 630,000 840,000 1,050,000 1,260,000
2,200,000 660,000 880,000 1,100,000 1,320,000
2,300,000 690,000 920,000 1,150,000 1,380,000
2,400,000 720,000 960,000 1,200,000 1,440,000
2,500,000 750,000 1,000,000 1,250,000 1,500,000
2,600,000 780,000 1,040,000 1,300,000 1,560,000
2,700,000 810,000 1,080,000 1,350,000 1,620,000
2,800,000 840,000 1,120,000 1,400,000 1,680,000
</TABLE>
*Plan only recognizes up to 30 years of credited service.
<PAGE>
The compensation covered by the retirement plans for each of the
named executives is the base salary rate at January 1, 1995
($1,140,000 for Mr. Stafford, $606,500 for Mr. Blount, $549,000
for Mr. Hassan, $399,000 for Mr. Hoynes and $341,000 for Mr.
Carr) plus the amount in the bonus column of the Summary
Compensation Table for 1994 for a total of $2,252,500 for Mr.
Stafford, $1,092,250 for Mr. Blount, $1,041,000 for Mr. Hassan,
$730,075 for Mr. Hoynes and $674,250 for Mr. Carr.
The years of service (in nearest years) as of December 31, 1995
for the named executives are as follows: Mr. Stafford, 26 years;
Mr. Blount, 21 years; Mr. Hassan, 7 years; Mr. Hoynes, 5 years
and Mr. Carr, 14 years.
The table shows the combined annual pension under the current
provisions of both retirement plans assuming retirement of an
employee who has continued employment to age 65 and assuming
payment as a single life annuity. (No reduction has been made for
the Social Security offset.)
<PAGE>
PERFORMANCE GRAPH
The following graph shows the value as of December 31, 1995 of a
$1,000 investment made on December 31, 1990 in the Corporation's
Common Stock (with dividends reinvested), as compared with
similar investments based on (i) the value of the S & P 500 Index
(with dividends reinvested) and (ii) the value of a market-
weighted Peer Group Index composed of the common stock of Abbott
Laboratories, American Home Products Corporation, Bristol-Myers
Squibb Company, Johnson & Johnson, Eli Lilly and Company, Merck &
Co., Inc., Pfizer Inc., Schering-Plough Corporation, and Warner-
Lambert Company, in each case on a "total return" basis assuming
reinvestment of dividends. (The Upjohn Company, previously
included in the Peer Group Index, is no longer publicly traded
and has therefore been omitted.) The market-weighted Peer Group
Index values were calculated from the beginning of the
performance period. The stock performance shown below is not
necessarily indicative of future performance.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
Comparative Values
Year AHPC Common Stock S&P 500 Index PEER GROUP
<S> <C> <C> <C>
12/31/90 $1,000.00 $1,000.00 $1,000.00
12/31/91 $1,653.20 $1,300.00 $1,572.99
12/31/92 $1,370.60 $1,396.70 $1,365.28
12/31/93 $1,372.90 $1,535.30 $1,284.94
12/31/94 $1,392.80 $1,555.20 $1,462.05
12/31/95 $2,220.00 $2,132.40 $2,327.16
</TABLE>
<PAGE>
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Corporation's compensation policies applicable to its
executive officers are administered by the Compensation and
Benefits Committee (the "Committee") of the Board of Directors.
All members of the Committee are non-employee directors. These
policies are designed to enhance the overall strength and
financial performance of the Corporation by aligning the
financial interests of the Corporation's executive officers with
those of its stockholders.
The three primary components of executive compensation are
base salary, awards under the Corporation's Management Incentive
Plan and annual grants of stock options and stock appreciation
rights ("SARs") and Restricted Stock awards. The Committee
recommends to the Board of Directors the salaries of the
executive officers and administers the Management Incentive Plan
and the Stock Option and Stock Incentive Plans under which
employee stock options and SARs are granted and Restricted Stock
awards are made. All of these primary components of executive
compensation are reviewed for competitiveness in relation to a
group of companies in the pharmaceutical industry by an
independent consulting firm specializing in executive
compensation. In certain instances, compensation data related to
consumer products and chemical industry companies are also
considered.
Base Salary
Base salaries for executive officers for the first six
months of 1995 were unchanged from the base salaries at July 1,
1994 which had been recommended by the Committee and approved by
the Board of Directors in May 1994 except for two executive
officers who received an increase on January 1, 1995 based on
increased responsibilities. Base salaries for the second six
months of 1995 were recommended by the Committee and approved by
the Board of Directors in May 1995, at which time the Committee
considered the financial performance of the Corporation as a
whole and its individual business units as well as the
contribution of each of the executive officers. In addition, the
Committee reviewed base salaries recommended by Mr. John R.
Stafford for executive officers other than himself. The
Committee then determined the base salary recommendation for Mr.
Stafford, out of his presence. The Committee also reviewed a
report of the independent compensation consulting firm (the
"Consultant's Report") with respect to its survey of compensation
information, which survey includes information for all of the
companies comprising the peer group index appearing on the
Performance Graph in this Proxy Statement as well as, for certain
executive officers, compensation data related to consumer
products and chemical industry companies.
Management Incentive Plan Awards
The stockholder-approved Management Incentive Plan is
designed to provide current and deferred incentive compensation
to selected key employees who contribute in a substantial degree
to the success of the Corporation, thus affording to them a means
of participating in that success and an incentive to contribute
further to that success.
The Committee determines the awards to be made under the
Plan to executive officers, including Mr. Stafford, and
determines and recommends to the Board the award fund. The award
fund under the Plan may not exceed 12% of the excess of net
income (as defined in the Plan) for any year over the greater of
either 12% of average net capital (as defined in the Plan) or an
amount equal to $.75 multiplied by the average number of shares
of Common Stock outstanding for the year, assuming full
conversion of the Corporation's Preferred Stock.
Plan participants, including executive officers, are
eligible to receive an award of up to 100% of salary. Under
current Committee policy, at least 50% of each award to executive
officers who are corporate vice presidents and above and to U.S.
executives whose base salary is $175,000 or above is made in the
form of a contingent stock award to be delivered in shares of the
Corporation's Common Stock either in the third year following the
year in respect of which the award was granted or after
retirement or termination of employment at the election of each
participant or as the Committee otherwise determines. The value
of each deferred contingent stock award together with its
associated dividend equivalent rights is tied to future
performance because it will rise and fall with the market price
of the Corporation's Common Stock and will reflect the payment of
dividends during the deferral period. Accordingly, an important
component of executive compensation is weighted to current and
deferred "bonus awards" based on the Corporation's financial
performance.
In determining amounts to be awarded to executive officers
under the Plan, the Committee takes into account a number of
factors, including the performance-related factors described
below under "Relationship of Corporate Performance to Executive
Compensation", as well as individual performance and achievement.
The awards for 1995 were granted by the Committee in January
1996. In addition, the Committee considered the amounts of
previous awards in deciding upon the awards for 1995. The
Committee also reviewed the Consultant's Report which indicated
that, overall, the Management Incentive Plan awards together with
base salaries were within the competitive range for competitive
companies.
Stock Option and Incentive Plans Grants
In contrast to salary and the cash portion of Management
Incentive Plan awards, the value to each executive officer of the
stock option grants is tied directly to stock price performance.
The Committee grants options/SARs under the stockholder-approved
option plans with an exercise price equal to the market price on
the date of grant. If there is no appreciation in the market
price for the Corporation's Common Stock, the options/SARs are
valueless.
Grants are made to executive officers based on salary,
responsibility and performance of the individual officer. Grants
are made to executive officers on an annual basis, thereby tying
option-based compensation to stock price performance over the
long term. Grants are not exercisable for one year following the
date of grant except in cases of the death, retirement, or
disability of the optionee. The grants for the named executives
were made by the Committee in May 1995 at the market price on the
date of grant of $76.25.
In May 1995, the Committee also granted SARs to the
executive officers in tandem with all currently held and newly
granted stock options at the price of the underlying options.
In furtherance of the goal of aligning the interests of
management with those of the stockholders, in May 1995 the
Committee also made Restricted Stock Performance Awards to
executives including the Chairman, President and Chief Executive
Officer. The Restricted Stock awards were granted in lieu of a
portion of the stock option award that would have been granted at
a ratio of one unit representing one share of Restricted Stock
replacing options/SARs covering four shares of Common Stock.
These awards represent units which will be converted to shares of
Restricted Stock based on 1997 performance, with the maximum
number of units that may be converted equal to 125% of the total
award. During the three-year restricted period ending in May
1998, all of the units and shares of Restricted Stock are
forfeited upon termination of employment for any reason other
than death, disability or retirement (in which case the units
will continue to be converted based upon satisfaction by the
Corporation of the performance criteria), unless the Committee
makes a partial or complete exception to this requirement.
Otherwise, all shares of Restricted Stock will be free of any
restrictions when the restricted period lapses. The shares are
valued at the mean between the high and low prices of the
Corporation's Common Stock on the Consolidated Transaction
Reporting System on the designated date of delivery.
In deciding to award Restricted Stock and make the annual
grant of options/SARs, the Committee considered the amounts of
options/SARs and Restricted Stock awards previously granted. The
Committee also reviewed the Consultant's Report which indicated
that, taken together, the grants and awards fell in the highest
or second highest quartile of the competitive companies.
Conversion of units to Restricted Stock for a portion of the
units covered by a Restricted Stock Performance Award made in
1994 was based on a formula related to the achievement of the
1995 targeted growth rate set by the Committee in February 1995.
As a result, 100% of one-third of the award was converted to
Restricted Stock in January 1996 based on 1995 performance.
Special Stock Option Grants
The Committee on its own initiative began discussions among
its members in January 1995, as well as with the independent
compensation consulting firm and the full Board, regarding a
special one-time additional stock option/SAR grant to certain key
members of management. The continued service of such executives
to the Corporation is believed to be important to the full
realization of the enhanced shareholder value to be derived from
the American Cyanamid acquisition and the various strategic plans
related thereto. In the Committee's view, the one-time
additional stock option/SAR grant would provide significant
incentive to these executives to assist the Corporation in
deriving maximum value from the acquisition.
After studying the matter over the next four months, at its
May 25, 1995 meeting the Committee made special one-time stock
option/SAR grants to certain designated senior members of
management, including the Chairman, President and Chief Executive
Officer. Unlike regular stock option/SAR grants which generally
vest after one year, these special grants vest either in equal
annual installments over a three-year period or in total at the
end of three years. In determining the amount of these grants,
the Committee followed the recommendation of the independent
compensation consulting firm which had reviewed information
regarding special one-time grants of options/SARs or restricted
stock awards by other companies in various industries.
Relationship of Corporate Performance to Executive Compensation
While all of the Corporation's executive officer
compensation is related to corporate performance, the awards
under the Management Incentive Plan are most closely tied to
corporate performance. The maximum aggregate amount of the award
fund is based on corporate performance in the manner described
under "Management Incentive Plan Awards", above. In determining
the amounts that were awarded to the Chairman, President and
Chief Executive Officer and executive officers generally, the
Committee viewed being of greatest significance the aggressive
implementation of the Corporation's strategic plan as evidenced
by the successful integration of the American Cyanamid businesses
into the Corporation, the program of divestiture of non-strategic
assets and the restructuring of the combined businesses.
The next most significant factor considered by the Committee
were the financial results achieved in 1995, which exceeded the
Corporation's initial forecast at the time of the acquisition.
This better than expected performance was primarily the result of
synergies being realized earlier than expected, faster paydown of
debt due to the sale of the oral health care business and a lower
effective interest rate than forecast.
The Committee also considered important the strengthening of
the Corporation's research capabilities.
With respect to Mr. Stafford, it was the Committee's view
that his vigorous leadership was instrumental in the planning and
execution of the programs and policies that resulted in the
favorable outcome of the factors considered above. The Committee
also viewed favorably his leadership activities in the
pharmaceutical industry in articulating industry positions and in
proposing alternative health care programs to the administration
and the U.S. Congress.
<PAGE>
Stock Ownership Guidelines for Executive Officer
Stock Ownership Guidelines ("Guidelines") have been adopted
for executive officers and other members of the Corporation's
Operations Committee. Authority to administer the Guidelines was
delegated to the Chairman, President and Chief Executive Officer,
who shall report periodically to the Committee on the status of
compliance with the Guidelines. The Guidelines state that the
Chief Executive Officer shall own shares of the Corporation's
stock with a value of at least four times his base salary.
Officers who report directly to the Chief Executive Officer shall
own shares with a value of at least three times base salary; and
all others covered by the Guidelines must own shares with a value
of at least twice base salary. As currently administered, stock
options/SARs are not counted toward compliance with the
Guidelines. Full compliance with the Guidelines by each covered
person must be achieved by the later of May 1999 or five years
from the date of appointment to the Finance or Operations
Committees.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code generally
disallows a tax deduction to public companies for compensation
over one million dollars paid in any year (not including amounts
deferred) to a corporation's Chief Executive Officer and to the
four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to
the deduction limit if certain requirements are met. The
Corporation believes that all compensation paid in 1995 is
deductible under Section 162(m) because the performance-based
compensation is structured in a manner believed to comply with
the statute.
Compensation and Benefits Committee
Frank A. Bennack, Jr., Chairman
Robin Chandler Duke
John P. Mascotte
ITEM 2.
APPOINTMENT OF PRINCIPAL INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee of the Board
of Directors, the Board of Directors has, subject to ratification
by the stockholders, appointed Arthur Andersen LLP as the
Corporation's principal independent public accountants for the
year 1996. This firm served in such capacity in 1995 and
previously. A representative of Arthur Andersen LLP will be
present at the Annual Meeting and will be available to make such
comments as may be appropriate and to answer proper questions.
The Board of Directors and Management recommend a vote FOR
ratification of the appointment of Arthur Andersen LLP as the
Corporation's principal independent public accountants for 1996.
______________________
ITEM 3.
PROPOSED AMENDMENTS TO THE RESTATED CERTIFICATE OF INCORPORATION
On January 25, 1996, the Board of Directors of the
Corporation unanimously approved the proposed amendments to the
Corporation's Restated Certificate of Incorporation to increase
the number of authorized shares of the Corporation's Common Stock
from 600,000,000 to 1,200,000,000 shares subject to approval by
the stockholders. On January 25, 1996, the Board of Directors
also unanimously approved a two-for-one stock split in the form
of a stock dividend of the Common Stock, subject to the approval
by the stockholders of the proposed amendments to the
Corporation's Restated Certificate of Incorporation (the "Stock
Split"). An increase in the number of authorized shares of
Common Stock is necessary for the Stock Split to be effected. If
the proposed amendments are not approved by the stockholders of
the Corporation, the stock split will not be effected.
In addition, the Board also unanimously approved an
amendment to increase the number of votes per share of the
Corporation's $2 Convertible Preferred Stock (the "Preferred
Stock") from nine to eighteen votes per share of Common Stock
when voting with the Common Stock. This will prevent dilution of
the voting rights of the Preferred Stock when the Stock Split is
effected.
The Board of Directors believes that the Stock Split and the
related amendment to the Corporation's Restated Certificate of
Incorporation to increase the Corporation's authorized shares of
Common Stock are in the best interests of the Corporation and its
stockholders because it will place the market price of the Common
Stock in a range more attractive to investors, particularly
individuals, and may broaden the market for, and increase the
liquidity of, the Corporation's Common Stock. The amendments
will permit the Corporation to effect the Stock Split, and will
provide additional shares of Common Stock which could be used for
various purposes without requiring further stockholder approval
unless necessitated by applicable law, regulation or stock
exchange rule. The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock and Preferred Stock,
voting together as a single class, is required for the adoption
of the proposed amendments. The text of the proposed amendments
is set forth in Exhibit I.
In addition to permitting the Stock Split, the additional
shares would be available for general corporate purposes,
including use in financing transactions, acquisitions, stock
dividends, further stock splits and employee stock option and
other stock ownership plans. Except for the Stock Split,
management of the Corporation has no plan, agreement or
understanding at the present time for the issuance or use of the
additional shares of Common Stock to be authorized by the
amendments. No holders of any class of stock of the Corporation
are entitled as a matter of right to any preemptive or
subscription rights with respect to any shares of the
Corporation's capital stock. The Corporation intends to apply to
list the additional shares to be issued as a result of the Stock
Split on the New York Stock Exchange.
If the amendments are approved and the Stock Split is
effected, one additional share of Common Stock will be issued for
each issued share of Common Stock (including treasury shares) and
one additional share of Common Stock will be reserved for each
share currently reserved for issuance upon conversion of the
Corporation's series of $2.00 Convertible Preferred Stock. The
record date for the determination of holders of Common Stock
entitled to receive additional shares resulting from the Stock
Split is expected to be April 24, 1996. It is anticipated that
certificates for additional shares will be mailed to stockholders
on or about May 6, 1996.
A total of approximately ___________ shares of Common Stock
will be issued as a result of the Stock Split. The additional
shares of Common Stock resulting from the Stock Split will have
one vote per share and the par value of the Common Stock will
remain $.33 1/3 per share. The Stock Split will not affect the
validity of Common Stock certificates already outstanding. Share
certificates for Common Stock outstanding on the record date will
continue thereafter to represent the same number of shares of
Common Stock indicated on the certificate.
The aggregate number of shares that may be sold under the
Corporation's stock option and stock incentive plans (the
"Plans"), the number of shares covered by outstanding
options/SARs and Restricted Stock Awards under such Plans and the
exercise price of each such option and SAR will be
proportionately adjusted to reflect the Stock Split. The
aggregate number of shares of Common Stock that may be issued
under the Management Incentive Plan and the number of shares of
Common Stock credited under contingent award accounts will be
proportionately adjusted to reflect the Stock Split. Other
appropriate adjustments will be made to the Corporation's
employee benefit plans to reflect the impact of the Stock Split.
None of the data in this proxy statement with respect to
outstanding stock, stock options, restricted stock, SARs or the
exercise prices of stock options or SARs has been adjusted to
give effect to the Stock Split.
Under existing law and regulation, the Stock Split will not
result in any gain or loss or any other form of taxable income to
the stockholders for federal income tax purposes. The laws of
jurisdictions other than the United States may impose income
taxes on the issuance of the additional shares in connection with
the Stock Split and stockholders subject to those laws are urged
to consult their tax advisors. A stockholder's basis in his or
her shares held before the Stock Split will be allocated between
such shares and the new shares for the purpose of determining
future gain or loss on a sale of any of the shares and the
holding period of new shares will include the holding period of
the shares with respect to which they were issued.
After the Stock Split, purchases and sales of Common Stock
by an individual stockholder may be subject to somewhat higher
brokerage charges and applicable stock transfer taxes than on a
pre-split transaction of equivalent market value, due to the
greater number of shares of Common Stock outstanding after the
Stock Split. In addition, the Corporation will incur certain
expenses in connection with the Stock Split, such as listing fees
and the cost of preparing and delivering to stockholders new
certificates representing the additional shares.
In connection with the Stock Split, a transfer of $.33 1/3
cents for each additional share of Common Stock issued or
approximately $_______ will be made from the Corporation's earned
surplus account to its capital account as of _____________, the
date on which stockholders will be entitled to the additional
shares, so that the additional shares to be issued will be fully
paid. The amounts so transferred will no longer be available for
distribution to stockholders as dividends.
Although an increase in the authorized shares of Common
Stock could, under certain circumstances, have an anti-takeover
effect (for example, by diluting the stock ownership of a person
seeking to effect a change in the composition of the Board of
Directors or contemplating a tender offer or other transaction
for the combination of the Corporation with another company),
this proposal to amend the Restated Certificate of Incorporation
is not in response to any effort of which the Corporation is
aware to accumulate the Corporation's stock or obtain control of
the Corporation, nor is it part of a plan by management to
recommend a series of similar amendments to the Board of
Directors and stockholders, although the 1996 Stock Incentive
Plan provides, among other things, that all options and SARs will
become immediately exercisable and the restrictions shall expire
with respect to Restricted Stock Awards in the event of a Change
in Control (as defined therein). See Item 4.
The Corporation's existing Restated Certificate of
Incorporation also includes certain other provisions which could
be characterized as having an anti-takeover effect, including (1)
providing that any vacancy on the Board be filled only by the
remaining directors then in office, whether or not less than a
quorum; (2) providing that advance notice of stockholder
nominations for election of directors be given and that certain
information be provided with respect to stockholder nominees in
the manner provided in the By-laws; (3) providing that directors
may be removed from office, with or without cause, by the
affirmative vote of the holders of 80% of the voting power of all
the shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class; (4)
requiring that stockholder action be taken only at an annual
meeting of stockholders or a special meeting of stockholders,
which may be called only by the Chairman or Vice Chairman of the
Board, the President or the Board of Directors, and prohibiting
stockholder action by written consent; and (5) providing that the
stockholder vote required to alter, amend or repeal the foregoing
amendments to the Certificate or related changes in the By-laws
is 80% of the voting power of all the Corporation's shares
entitled to vote generally in the election of directors, voting
together as a single class.
The Board of Directors and Management recommend a vote FOR
approval of the amendments.
______________________________
ITEM 4.
PROPOSED 1996 STOCK INCENTIVE PLAN
Previous stock option plans were designed to attract and
retain persons of exceptional performance to the Corporation and
its subsidiaries, as well as to insure additional incentive for
persons who can contribute significantly to the success of the
business.
In the belief that the plans adopted earlier accomplished
their objectives and that the Corporation should be in a position
to continue to provide incentives to officers and other
employees, whose number has increased significantly since the
acquisition of American Cyanamid Company, to contribute to the
future success and prosperity of the Corporation, the Board of
Directors, on January 25, 1996, unanimously adopted the 1996
Stock Incentive Plan (the "1996 Plan"), subject to approval by
the stockholders. The following is a summary of the provisions
of the 1996 Plan.
The 1996 Plan will be administered by the Compensation and
Benefits Committee (the "Committee") composed of non-employee
members of the Board of Directors of the Corporation, each of
whom is a "disinterested person" under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
Under the 1996 Plan, the Committee may, from time to time, grant
stock options and Stock Appreciation Rights ("SARs"), and award
shares of Common Stock subject to certain restrictions or units
representing such shares ("Restricted Stock"), to executive
officers (whether or not directors) (currently 13 officers) and
approximately 16,000 other key employees of the Corporation and
its subsidiaries ("optionees"). The 1996 Plan provides for the
granting of incentive stock options, within the meaning of
Section 422(b) of the Code, and non-qualified stock options as
determined by the Committee. The Committee, in its discretion,
may grant SARs in tandem with these options with exercise prices
equal to the exercise prices of the underlying options. The
option price per share shall not be less than the fair market
value of a share of the Corporation's Common Stock on the date
the option is granted. The Committee may also, in its
discretion, grant SARs to certain optionees in tandem with
previously granted options at the price of the underlying
options. Awards of Restricted Stock under the 1996 Plan may be
subject to such terms, conditions and restrictions (whether based
on performance standards, periods of service or otherwise) as the
Committee shall establish and set forth in Restricted Stock
agreements.
The maximum number of shares of Common Stock that can be
issued under the 1996 Plan is 15 million (such number shall be
adjusted to 30 million, without further action, upon consummation
of the proposed two-for-one Stock Split, to be effected in the
form of a stock dividend), including a maximum of two million (to
be similarly adjusted to four million) shares that may be subject
to Restricted Stock awards. The maximum number of shares of
Common Stock which can be sold or awarded under the 1996 Plan to
any optionee during the term of the 1996 Plan, including shares
for which SARs may be exercised, shall not exceed 10% of the
maximum number of shares issuable under the 1996 Plan. Under the
1996 Plan, no options can be granted, nor awards made, before
January 25, 1996 or after January 24, 2006.
Options granted under the 1996 Plan will become exercisable
and expire in accordance with the 1996 Plan and the applicable
option agreement, provided that no option may become exercisable
earlier than the later of (i) one year from the date of grant or
(ii) the date on which the optionee completes two years of
continuous employment with the Corporation or its subsidiaries.
Notwithstanding the foregoing, in the event of a Change in
Control (as defined in the 1996 Plan), all options and SARs shall
become immediately exercisable (and the restrictions shall expire
with respect to Restricted Stock awards) and, at the discretion
of the Committee, any outstanding options, SARs or restricted
stock awards may be cancelled and the holders thereof paid the
value thereof as described in the 1996 Plan.
There is a three year period after termination of an
optionee's employment due to death or due to Retirement or
Disability (each as defined in the 1996 Plan), during which any
unexercised options or SARs held by the optionee, to the extent
exercisable at the time of termination, may be exercised, unless
an earlier termination date is specified in the option agreement.
In the event of the termination of an optionee's employment by
the Corporation or a subsidiary for reasons other than death,
Retirement, Disability or deliberate gross misconduct, there is a
three month period after such termination during which any
unexercised options or SARs, to the extent exercisable at the
time of termination, may be exercised unless an earlier
termination date is specified in the option agreement. To the
extent unexercised, options and SARs will expire immediately upon
the termination by the optionee of his or her employment for
reasons other than Retirement, Disability or death and
immediately upon the termination of an optionee's employment by
the Corporation or a subsidiary for deliberate gross misconduct.
Shares of Common Stock with respect to which options or SARs are
not exercised prior to termination or which are cancelled, or
shares of Restricted Stock which are forfeited, will be available
for subsequent grants under the 1996 Plan.
Upon the exercise of an option, the full option price,
either in cash, Common Stock or a combination of cash and Common
Stock, or in any other form of consideration approved by the
Committee, including under any cashless exercise program approved
by the Committee, is required to be paid to the Corporation.
SARs granted to officers and directors of the Corporation subject
to Section 16(b) of the Exchange Act may be exercised only during
certain ten-day "window periods" outlined in the 1996 Plan,
unless otherwise determined by the Committee in the event that
Rule 16b-3 ceases to impose such a requirement.
The 1996 Plan provides that options, SARs and shares of
Restricted Stock are nontransferable other than by the laws of
descent and distribution. However, the Committee may, in its
discretion, allow transfers of options (but not SARs) to other
persons or entities unless such transfer would affect the
incentive stock option tax treatment of such option or affect the
exemption from short swing liability of such option under the
Exchange Act. The Committee may also, in its discretion, allow
for the transfer of shares of Restricted Stock to other persons
or entities.
The 1996 Plan authorizes the Committee to permit the
deferral of the delivery of the proceeds from the exercise of an
option or SAR on the terms and conditions set forth in the 1996
Plan. Interest will be credited to the deferred amounts at a
rate of interest determined by the Committee and the deferred
account balance will be payable, at the election of the optionee,
either in a lump sum payment or in annual installments over a
period of up to 10 years. Such deferred amounts may be disbursed
earlier in certain events such as Disability, death, an
"unforeseeable emergency" or otherwise at the discretion of the
Committee.
The 1996 Plan contains the non-competition and "employment
at will" provisions contained in the Corporation's other stock
option plans.
The closing market price of one share of Common Stock on the
New York Stock Exchange as of February 12, 1996 was $101.75.
If the aggregate fair market value of the Common Stock,
determined at the time of grant, with respect to which incentive
stock options are granted under the 1996 Plan or any other plan
of the Corporation, are exercisable for the first time by an
optionee during any calendar year exceeds $100,000, or such other
amount as may be permitted under the Code, such excess shall be
considered non-qualified stock options. The 1996 Plan also
contains limitations on the grant of incentive stock options to
any holder of more than 10% of the combined voting power of the
Corporation's voting stock.
An optionee will not be subject to federal income tax upon
the grant of an option under the 1996 Plan. Upon exercise of a
non-qualified stock option, the optionee must generally recognize
ordinary income in the amount of the "option spread" (the
difference between the fair market value of the option shares and
the exercise price) at the date of exercise and the optionee's
employer is generally entitled to a tax deduction in the same
amount subject to applicable tax withholding requirements; and
upon sale, appreciation (or depreciation) after the date of
exercise is treated as either short-term or long-term capital
gain (or loss) depending on how long the shares have been held.
Upon exercise of an incentive stock option, the optionee
generally will not have to recognize any taxable income (except
that the alternative minimum tax may apply). Instead, the
optionee will be subject to taxation only upon the disposition of
the shares acquired upon exercise of the incentive stock option.
If the optionee disposes of the shares acquired upon exercise of
an incentive stock option more than two years after the date of
grant of the incentive stock option and more than one year after
exercise, he or she will realize a long-term capital gain (or
loss) based on the difference between the sale price of the
shares and the exercise price of the option (or his or her basis
in the shares if it is not equal to the exercise price).
Otherwise, in the event the optionee disposes of the shares
acquired pursuant to the exercise of an incentive stock option
prior to the expiration of two years from the date of grant or
one year from the date of exercise of the incentive stock option,
the optionee will realize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair
market value of such shares on the date of exercise or the amount
realized on a sale (whichever is less) over the option price, and
the optionee's employer will be entitled to deduct such amount
for federal income tax purposes. Any further gain (or loss)
realized by the optionee upon the sale of the Common Stock will
be taxed as short-term or long-term capital gain (or loss),
depending on how long the shares have been held, and will not
result in any further deduction by the employer.
To enable optionees to satisfy tax withholding obligations
relating to non-qualified stock options, in lieu of cash payment
the Committee may provide that optionees may elect to have the
Corporation withhold from an option exercise, or separately
surrender, shares of Common Stock.
Because all grants and awards under the 1996 Plan are
entirely within the discretion of the Committee, the total
benefits allocable under the 1996 Plan in the future are not at
present determinable. No grants or awards have been made to date
and no grants or awards will be made by the Corporation until
such time as the 1996 Plan is approved by the stockholders at the
1996 annual meeting.
The proposal to approve the 1996 Plan requires the
affirmative vote of the holders of a majority of the Common Stock
and $2 Convertible Preferred Stock, voting as a single class,
present or represented and entitled to vote at the meeting.
However, under Rule 16b-3 of the Exchange Act, abstentions will
be counted as votes cast against the proposal for purposes of
tabulating the votes on this item. Broker non-votes will have no
effect.
The Board of Directors and Management recommend a vote FOR
approval of the 1996 Stock Incentive Plan.
Stockholder Proposals for 1997 Annual Meeting
Stockholder proposals intended to be presented at the 1997
Annual Meeting must be received by the Corporation at its
principal executive offices on or before November __, 1996 in
order to be considered for inclusion in the Corporation's proxy
statement and form of proxy relating to that meeting.
<PAGE>
OTHER MATTERS
Management knows of no other matters to be brought before
the Annual Meeting, but if other matters come before the meeting,
it is the intention of the persons named in the accompanying
proxy to take such action as in their judgment is in the best
interest of the Corporation and its stockholders.
The Corporation will bear the expenses in preparing,
printing and mailing the proxy materials to the stockholders.
In addition, the Corporation will retain D.F. King & Co., Inc.,
New York, NY, to aid in the solicitation of proxies, for which
such firm will be paid a fee of $18,500 plus out-of-pocket
expenses and disbursements. In addition, officers and employees
of the Corporation and its subsidiaries may request the return of
proxies by telephone, telegram or in person, for which no
additional compensation will be paid to them.
The Annual Report of the Corporation for the year ended
December 31, 1995, including financial statements, has been
mailed to stockholders.
Regardless of the number of shares you hold, it is important
that your stock be represented at the meeting in order that the
presence of a quorum can be secured. If you are unable to attend
the meeting, you are urged to date and sign your proxy and return
it without delay in the enclosed addressed envelope. The shares
represented by each proxy so signed and returned will be voted in
accordance with the stockholder's directions.
By Order of the Board of Directors
Carol G. Emerling
Secretary
March __, 1996
<PAGE>
EXHIBIT I
Amendments to Restated Certificate of Incorporation
Amendments to the following sections of the Restated
Certificate of Incorporation are reflected by printing additions
in bold face; deleted material is reflected by lining through.
[For SEC EDGAR Filing - Deletions are enclosed in brackets]
1. The first sentence of the first paragraph of Article FOURTH
of the Restated Certificate of Incorporation of the
Corporation is hereby amended in its entirety to read as
follows:
"The total number of shares of Capital Stock which may be
issued by the corporation is [Six hundred five million
(605,000,000)] One Billion Two Hundred Five Million
(1,205,000,000) of which [Six hundred million (600,000,000)]
One Billion Two Hundred Million (1,200,000,000) shares shall
be Common Stock, [of the] par value of Thirty-three and one-
third cents (.33 1/3 cents) per share and Five Million
(5,000,000) shares shall be Preferred Stock (hereinafter
referred to as the "Preferred Stock"), [of the] par value of
Two Dollars fifty cents ($2.50) per share."
2. The first sentence of subdivision (g) of Section VII of such
Article FOURTH is hereby amended in its entirety to read as
follows:
"The shares of such series shall be entitled to [Nine
(9)] Eighteen (18) votes per share voting with the
shares of Common Stock at any annual or special meeting
of stockholders for the election of directors and upon
any other matter coming before such meeting."
<PAGE>
APPENDIX A
[FORM OF PROXY CARD]
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
This Proxy is solicited on Behalf of the Board of Directors
and Management.
The undersigned hereby appoints JOHN R. STAFFORD, LOUIS L.
HOYNES, JR. and CAROL G. EMERLING and each of them proxies with
power of substitution, to represent and to vote, as designated
below, on behalf of the undersigned at the Annual Meeting of
Stockholders of the Corporation to be held on April 23, 1996 and
at any adjournment thereof on each of the following matters, as
set forth in the Proxy Statement, and upon such other matters
properly coming before the meeting.
This proxy when properly executed will be voted in the manner
directed by the stockholder. If no direction is given, this
proxy will be voted FOR Items 1, 2, 3 and 4.
(Continued and to be signed on the reverse side)
/ /
OPTIONAL SECRET PROXY
____________ _______________
Common Preferred
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE "FOR"
ITEMS 1, 2, 3 and 4
Item 1 - ELECTION OF DIRECTORS:
Nominees:
C.L. Alexander, Jr., F.A. Bennack, Jr., R.G. Blount,
R.C. Duke, J.D. Feerick, F. Hassan, J.P. Mascotte, M.L.
Polan, J.R. Stafford, J.R. Torell III and W. Wrigley
FOR / / WITHHELD FOR ALL / /
WITHHELD FOR: (Write that nominee's name in the space provided
below):
________________________________
Item 2 - APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
FOR / / AGAINST / / ABSTAIN / /
<PAGE>
Item 3 - AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE TO 1,200,000,000 THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK AND A RELATED MATTER
FOR / / AGAINST / / ABSTAIN / /
Item 4 - ADOPTION OF THE 1996 STOCK INCENTIVE PLAN
FOR / / AGAINST / / ABSTAIN / /
Signature(s)_____________________________ Date___________________
Note: Please sign exactly as the name appears above. When shares
are held by joint owners, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
<PAGE>
APPENDIX B
American Home Products Corporation
1996 STOCK INCENTIVE PLAN
(As approved by the Board of Directors on January 25, 1996,
subject to the approval of stockholders at the April 1996 Annual
Meeting)
Section 1. Purpose. The purpose of the 1996 Stock Incentive
Plan (the "Plan") is to provide favorable opportunities for officers
and other key employees of American Home Products Corporation (the
"Company") and its subsidiaries to acquire shares of Common Stock of
the Company or to benefit from the appreciation thereof. Such
opportunities should provide an increased incentive for these
employees to contribute to the future success and prosperity of the
Company, thus enhancing the value of the stock for the benefit of
the stockholders, and increase the ability of the Company to attract
and retain individuals of exceptional skill upon whom, in large
measure, its sustained progress, growth and profitability depend.
Pursuant to the Plan, options to purchase the Company's Common
Stock ("Options") and Stock Appreciation Rights may be granted and
Restricted Stock may be awarded by the Company. Options granted
under the Plan may be either incentive stock options, as defined in
Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), or options which do not meet the requirements of said
Section 422(b) of the Code, herein referred to as non-qualified
stock options.
It is intended, except as otherwise provided herein, that
incentive stock options may be granted under the Plan and that such
incentive stock options shall conform to the requirements of
Section 422 and 424 of the Code and to the provisions of this Plan
and shall otherwise be as determined by the Committee and, to the
extent provided in the last sentence of Section 2 hereof, approved
by the Board of Directors. The terms "subsidiaries" and "subsidiary
corporation" shall have the meanings given to them by Section 424 of
the Code. All section references to the Code in this Plan are
intended to include any amendments or substitutions therefor
subsequent to the adoption of the Plan.
Section 2. Administration. The Plan shall be administered by
the Compensation and Benefits Committee (the "Committee") consisting
of two or more members of the Board of Directors of the Company,
each of whom shall be (i) a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (ii) an "outside director" within
the meaning of Section 162(m) of the Code. The Committee shall have
full authority to grant Options and Stock Appreciation Rights, and
make Restricted Stock awards, to interpret the Plan and to make such
rules and regulations and establish such procedures as it deems
appropriate for the administration of the Plan, taking into
consideration the recommendations of management. The decisions of
the Committee shall be binding and conclusive for all purposes and
upon all persons unless and except to the extent that the Board of
Directors of the Company shall have previously directed that all or
specified types of decisions of the Committee shall be subject to
approval by the Board of Directors.
Section 3. Number of Shares. The total number of shares which
may be sold or awarded under the Plan and with respect to which
Stock Appreciation Rights may be exercised shall not exceed
15,000,000 shares of the Company's Common Stock. Such number shall
be, without further action, adjusted to 30,000,000 in accordance
with Section 8 hereof upon the consummation of a two-for-one stock
split (in the form of a dividend) anticipated to occur in 1996. The
total number of shares which may be sold or awarded under the Plan
to any optionee (hereinafter defined), including shares for which
Stock Appreciation Rights may be exercised, shall not exceed 10% of
such number, as and if adjusted, over the life of the Plan. The
shares may be authorized and unissued or issued and reacquired
shares, as the Board of Directors from time to time may determine.
Shares with respect to which Options or Stock Appreciation Rights
are not exercised prior to termination of the Option and shares that
are part of a Restricted Stock award which are forfeited before the
restrictions lapse shall be available for Options and Stock
Appreciation Rights thereafter granted and for Restricted Stock
thereafter awarded under the Plan, to the fullest extent permitted
by Rule 16b-3 under the Exchange Act (if applicable at the time).
Section 4. Participation. The Committee may, from time to
time, select and grant Options and Stock Appreciation Rights to
officers (whether or not directors) and other key employees of the
Company and its subsidiaries ("optionees") and award Restricted
Stock to officers (whether or not directors) and other key employees
of the Company and its subsidiaries and shall determine the number
of shares subject to each Option or award.
Section 5. Terms and Conditions of Options. The terms and
conditions of each Option and each Stock Appreciation Right shall
be set forth in an agreement or agreements between the Company and
the optionee. Such terms and conditions shall include the following
as well as such other provisions, not inconsistent with the Plan, as
may be deemed advisable by the Committee:
(a) Number of Shares. The number of shares subject to
the Option.
(b) Option Price. The option price per share (the
"Option Price"), which shall not be less than 100% of the fair
market value of the Company's Common Stock on the date the
Option is granted. Fair market value shall be deemed to be the
mean between the highest and lowest sale prices of the Common
Stock on the Consolidated Transaction Reporting System on the
date the Option is granted.
(c) Date of Grant. Subject to previous directions of
the Board of Directors pursuant to the last sentence of Section
2, the date of grant of an Option shall be the date when the
Committee meets and awards such Option.
(d) Payment. The Option Price multiplied by the number
of shares to be purchased by exercise of the Option shall be
paid upon the exercise thereof. Unless the terms of an Option
provide to the contrary, upon exercise, the aggregate Option
Price shall be payable by delivering to the Company (i) cash
equal to such aggregate Option Price, (ii) shares of the
Company's Common Stock owned by the grantee having a fair
market value (determined in accordance with Section 5(b)) at
least equal to such aggregate Option Price, (iii) a combination
of any of the above methods which total to such aggregate
Option Price, or (iv) any other form of consideration which has
been approved by the Committee, including under any approved
cashless exercise mechanism; and payment of such aggregate
Option Price by any such means shall be made and received by
the Company prior to the delivery of the shares as to which the
Option was exercised. The right to deliver in full or partial
payment of such Option Price any consideration other than cash
shall be limited to such frequency as the Committee shall
determine in its absolute discretion. A holder of an Option
shall have none of the rights of a stockholder until the shares
are issued to him or her; provided that if an optionee
exercises an Option and the appropriate purchase price is
received by the Company in accordance with this Section 5(d)
prior to any dividend record date, such optionee shall be
entitled to receive the dividends which would be paid on the
shares subject to such exercise if such shares were outstanding
on such record date.
(e) Term of Options. Each Option granted pursuant to
the Plan shall be for the term specified in the applicable
option agreement (the "Option Agreement") subject to earlier
termination in all cases as provided in paragraph (g) of this
Section.
(f) Exercise of Option. Options granted under the Plan
may be exercised during the period and in accordance with the
conditions set forth in the Plan and the applicable Option
Agreement; provided, however, that (i) no option granted under
the Plan may be exercisable earlier than the later of (A) one
year from the date of grant or (B) the date on which the
optionee completes two years of continuous employment with the
Company or one or more of its subsidiaries and (ii) in the
event of an optionee's death, Retirement (as defined below) or
Disability (as defined below), any options held by such
optionee shall become exercisable on his or her Retirement
date, the date his or her employment terminates on account of
Disability or the date of his or her death provided he or she
has been in the continuous employment of the Company or one or
more of its subsidiaries for at least two years at such time.
No Option may be exercised after it is terminated as provided
in paragraph (g) of this Section, and no Option may be
exercised unless the optionee, except as provided in paragraph
(g) of this Section, is then employed by the Company or any of
its subsidiaries and shall have been continuously employed by
the Company or one or more of such subsidiaries since the date
of the grant of his or her Option. Non-qualified stock options
and incentive stock options may be exercised regardless of
whether or not other Options granted to the optionee pursuant
to the Plan are outstanding or whether or not other stock
options granted to the optionee pursuant to any other plan are
outstanding.
(g) Termination of Options. An Option, to the extent
not validly exercised, shall terminate upon the occurrence of
the first of the following events:
(i) On the date specified in the Option
Agreement;
(ii) Three years after the date of
termination of the optionee's employment by the Company
or its subsidiaries due to "Retirement" (defined as
termination of full time employment on or after the
earliest retirement age under any qualified retirement
plan of the Company or its subsidiaries which covers the
optionee, or age 55 with 5 continuous years of such
employment if there is no such plan) or "Disability"
(defined as disability for purposes of at least one
qualified retirement plan or long term disability plan
maintained by the Company or its subsidiaries in which the
optionee participates), during which three year period the
optionee may exercise the Option to the extent he or she
was entitled to exercise it at the time of such
termination or such shorter period as may be provided in
the Option Agreement;
(iii) Three years after the date of the
optionee's death during which three year period the Option
may be exercised by the optionee's legal representative
or legatee or such other person designated by an
appropriate court as the person entitled to exercise such
Option to the extent the optionee was entitled to exercise
it at the time of his or her death;
(iv) Three months after termination by
the Company or one of its subsidiaries of the optionee's
employment for any reason other than death, Retirement,
Disability or deliberate gross misconduct, determined in
the sole discretion of the Committee, during which three
month period the Option may be exercised by the optionee
to the extent the optionee was entitled to exercise it at
the time of such termination;
(v) Concurrently with the time of
termination by the Company or one of its subsidiaries of
the optionee's employment for deliberate gross misconduct,
determined in the sole discretion of the Committee (for
purposes only of this subparagraph (v) an Option shall be
deemed to be exercised when the optionee has received the
stock certificate representing the shares for which the
Option was exercised); or
(vi) Concurrently with the time of
termination by the employee of his or her employment with
the Company or one of its subsidiaries for reasons other
than Retirement, Disability or death.
Notwithstanding the above, no Option shall be exercisable
after termination of employment unless the optionee shall
have, during the entire time period in which his or her
Options are exercisable, (a) refrained from becoming or
serving as an officer, director, partner or employee of any
individual proprietorship, partnership or corporation, or the
owner of a business, or a member of a partnership which
conducts a business in competition with the Company or renders
a service (including without limitation, advertising agencies
and business consultants) to competitors with any portion of
the business of the Company, (b) made himself or herself
available, if so requested by the Company, at reasonable times
and upon a reasonable basis to consult with, supply
information to, and otherwise cooperate with, the Company and
(c) refrained from engaging in deliberate action which, as
determined by the Committee, causes substantial harm to the
interests of the Company. If these conditions are not
fulfilled, the optionee shall forfeit all rights to any
unexercised Option as of the date of the breach of the
condition.
Notwithstanding the provisions of subparagraphs (ii) and
(iii) of this Section 5(g), an Option granted under the Plan to
an optionee who dies or terminates employment due to Retirement
or Disability before this Plan is approved by the stockholders
of the Company, to the extent not validly exercised, shall
terminate three years after the date the Plan is approved by
the stockholders of the Company.
(h) Non-transferability of Options and Stock Appreciation
Rights. Options and Stock Appreciation Rights shall not be
transferable by the optionee other than by will or the laws of
descent and distribution, and Options and Stock Appreciation Rights
shall during his or her lifetime be exercisable only by the
optionee; provided, however, that the Committee may, in its sole
discretion, allow for transfer of Options (other than incentive
stock options, unless such transferability would not adversely
affect incentive stock option tax treatment) to other persons or
entities, subject to such conditions or limitations as it may
establish to ensure that transactions with respect to Options
intended to be exempt from Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 under the Exchange Act do not fail to
maintain such exemption as a result of the Committee causing Options
to be transferrable, or for other purposes; provided further,
however, that for any Option that is transferred, other than by the
laws of descent and distribution, any related Stock Appreciation
Right shall be extinguished.
(i) Applicable Laws or Regulations. The Company's obligation
to sell and deliver stock under the Option is subject to such
compliance as the Company deems necessary or advisable with federal
and state laws, rules and regulations.
(j) Limitations on Incentive Stock Options. To the extent
that the aggregate fair market value of the Company's Common Stock,
determined at the time of grant in accordance with the provisions of
Section 5(b), with respect to which incentive stock options granted
under this or any other Plan of the Company are exercisable for the
first time by an optionee during any calendar year exceeds $100,000,
or such other amount as may be permitted under the Code, such excess
shall be considered non-qualified stock options.
Notwithstanding anything in the Plan to the contrary, any
incentive stock option granted to any individual who, at the time
of grant, is the owner, directly or indirectly, of stock possessing
more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any subsidiary thereof, shall
(i) have a term not exceeding five years from the date of grant and
(ii) shall have an option price per share of not less than 110% of
the fair market value of the Company's Common Stock on the date the
incentive stock option is granted (determined in accordance with the
last sentence of Section 5(b)).
Section 6. Stock Appreciation Rights.
(a) The Committee may, in its sole discretion, from time to
time grant Stock Appreciation Rights to certain optionees in
connection with any Option granted under this Plan and in connection
with Options granted under the 1990 and 1993 Stock Incentive Plans
and under the 1985 Stock Option Plan. Stock Appreciation Rights may
be granted either at the time of the grant of an Option under the
Plan or at any time thereafter during the term of the Option,
provided such Stock Appreciation Rights may also be granted with
respect to outstanding Options under the 1990 and 1993 Stock
Incentive Plans and the 1985 Stock Option Plan. Stock Appreciation
Rights may be granted with respect to all or part of the stock under
a particular Option.
(b) Stock Appreciation Rights shall entitle the holder of the
related Option, upon exercise, in whole or in part, of the Stock
Appreciation Rights, to receive payment in the amount and form
determined pursuant to subparagraph (iii) of paragraph (c) of this
Section 6. Stock Appreciation Rights may be exercised only to the
extent that the related Option has not been exercised. The exercise
of Stock Appreciation Rights shall result in a pro rata surrender of
the related Option to the extent that the Stock Appreciation Rights
have been exercised.
(c) Stock Appreciation Rights shall be subject to such terms
and conditions which are not inconsistent with the Plan as shall
from time to time be approved by the Committee and reflected in the
applicable Option Agreement (or in a separate document, which shall
be considered for purposes of the Plan to be incorporated into and
part of the applicable Option Agreement), and to the following terms
and conditions.
(i) Stock Appreciation Rights shall be
exercisable at such time or times and to the extent, but
only to the extent, that the Option to which they relate
shall be exercisable.
(ii) Subject to Section 9, Stock Appreciation
Rights and any Options to which they relate shall in no
event be exercisable during the first six months after the
date of grant; provided that this limitation shall apply
only to persons who are subject to Section 16(b) of the
Exchange Act.
(iii) Upon exercise of Stock Appreciation
Rights, the holder thereof shall be entitled to elect to
receive therefor payment in the form of shares of the
Company's Common Stock (rounded down to the next whole
number so no fractional shares are issued), cash or any
combination thereof in an amount equal in value to the
difference between the Option Price per share and the fair
market value per share of Common Stock on the date of
exercise multiplied by the number of shares in respect of
which the Stock Appreciation Rights shall have been
exercised, subject to any limitation on such amount which
the Committee may in its discretion impose at the time of
grant of the Stock Appreciation Rights. Such election as
to the form of payment shall be subject to the consent of
the Committee which consent or disapproval may be given
at any time after the election to which it relates. The
fair market value of Common Stock shall be deemed to be
the mean between the highest and lowest sale prices of the
Common Stock on the Consolidated Transaction Reporting
System on the date the Stock Appreciation Right is
exercised or if no transaction on the Consolidated
Transaction Reporting System occurred on such date, then
on the last preceding day on which a transaction did take
place.
(iv) Any exercise of Stock Appreciation Rights
by an officer or director subject to Section 16(b) of the
Exchange Act, as well as any election by such officer or
director as to the form of payment of Stock Appreciation
Rights (Common Stock, cash or any combination thereof),
which election is subject to the consent of the Committee
in its sole discretion as provided in subparagraph (iii)
hereof, shall be made during the ten-day period beginning
on the third business day following the release for
publication of any quarterly or annual statement of sales
and earnings by the Company and ending on the twelfth
business day following the date of such release. In the
event that such a director or officer exercises a Stock
Appreciation Right for cash or stock pursuant to this
Section 6 during a "window period" as provided in Rule
16b-3 under the Exchange Act, the day on which such right
is effectively exercised shall be that day, if any, during
such "window period" which is designated by the Committee
in its discretion for all such exercises by such
individuals during such period. If no such day is
designated, the day of effective exercise shall be
determined in accordance with normal administrative
practices of the Plan. This clause (iv) shall cease to
apply at the discretion of the Committee if any amendment
or Securities and Exchange Commission interpretation of
such Rule 16b-3 makes the application of this clause (iv)
unnecessary to exempt the grant and/or exercise of Stock
Appreciation Rights from the application of Section 16(b)
of the Exchange Act.
(d) To the extent that Stock Appreciation Rights shall be
exercised, the Option in connection with which such Stock
Appreciation Rights shall have been granted shall be deemed to have
been exercised for the purpose of the maximum limitations set forth
in the Plan under which such Options shall have been granted. Any
shares of Common Stock which are not purchased due to the surrender
in whole or in part of an Option pursuant to this Section 6 shall
not be available for granting further Options under the Plan.
Section 6A. Deferral.
(a) Notwithstanding anything herein to the contrary, an
optionee may elect, at the discretion of, and in accordance with
rules which may be established by, the Committee, to defer delivery
of the proceeds of exercise of an unexercised Option or the
corresponding Stock Appreciation Right, provided such election is
irrevocable and is made (i) at least six months prior to the date
that such Option or the corresponding Stock Appreciation Right
otherwise would expire and (ii) at least one month prior to the
date such Option or the corresponding Stock Appreciation Right is
exercised (or such shorter period as may be determined by the
Committee). Upon such exercise, the amount deferred shall be equal
in value to the difference between the Option Price per share and
the fair market value per share of the Common Stock on the date of
exercise (determined in accordance with Section 5(b)), multiplied
by the number of shares covered by such exercise and in respect of
which the optionee shall have made the deferral election, and shall
be credited to an account in the name of the optionee on the books
and records of the Company (a "Deferred Compensation Account") at
the date of exercise. A separate Deferred Compensation Account
shall be maintained with respect to each Option or corresponding
Stock Appreciation Right subject to an effective deferral election.
(b) Interest shall be credited on amounts in the
Deferred Compensation Account from the date of exercise of the
Option or the corresponding Stock Appreciation Right to the date
of payment, at the rate of interest determined by the Committee and
communicated to the optionees. The value of an optionee's Deferred
Compensation Account shall be payable in a lump sum cash payment or
in annual installments over a period not to exceed 10 years or as
otherwise determined by the Committee. At the time an optionee
makes such deferral election, the optionee shall elect the form of
payment and date for lump sum payment or commencement of annual
payments of the Deferred Compensation Account, with such date at
least one year subsequent to the date of exercise of the Option or
corresponding Stock Appreciation Right, but not later than the date
of the optionee's termination of employment with Company.
Notwithstanding any election by an optionee, in the event of
Disability or death of the optionee, the optionee's Deferred
Compensation Account shall be paid within 90 days in the form of a
single lump sum.
(c) Notwithstanding the deferred payment date elected
by the optionee, the Committee may, in its discretion, allow for
early payment of an optionee's Deferred Compensation Account in the
event of an "unforeseeable emergency." For this purpose, an
unforeseeable emergency shall be defined as an unanticipated
emergency that is caused by an event beyond the control of the
optionee and that would result in severe financial hardship to the
optionee if early withdrawal were not permitted. Any withdrawal on
account of an unforeseeable emergency must be limited to the amount
necessary to meet the emergency. The above provisions regarding a
withdrawal upon an unforeseeable emergency shall be interpreted in
accordance with published revenue procedures, regulations, releases
or interpretations. In addition, Deferred Compensation Accounts
may be distributed on an accelerated basis in the discretion of the
Committee.
(d) Optionees have the status of general unsecured
creditors of the Company with respect to their Deferred
Compensation Accounts, and such accounts constitute a mere promise
by the Company to make payments with respect thereto.
(e) An optionee's right to benefit payments under the
Plan with respect to the Deferred Compensation Accounts may not be
anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, attached or garnished by creditors of the optionee or
the optionee's beneficiary and any attempt to do so shall be void.
Section 7. Restricted Stock Performance Awards. The Committee
may, in its sole discretion, from time to time, make awards of
shares of the Company's Common Stock or awards of units representing
shares of the Company's Common Stock, up to 2,000,000 shares in the
aggregate (such number to be adjusted without further action to
4,000,000 in accordance with Section 8 hereof upon the consummation
of the stock split referred to in Section 3), to such officers and
other key employees of the Company and its subsidiaries in such
quantity, and on such terms, conditions and restrictions (whether
based on performance standards, periods of service or otherwise) as
the Committee shall establish ("Restricted Stock"). The terms,
conditions and restrictions of any Restricted Stock award made under
this Plan shall be set forth in an agreement or agreements between
the Company and the recipient of the award.
(a) Issuance of Restricted Stock. The Committee shall
determine the manner in which Restricted Stock shall be held during
the period it is subject to restrictions.
(b) Stockholder Rights. Beginning on the date of grant
of the Restricted Stock award and subject to the execution of the
award agreement by the recipient of the award and subject to the
terms, conditions and restrictions of the award agreement, the
Committee shall determine to what extent the recipient of the award
has the rights of a stockholder of the Company including, but not
limited to, whether or not the employee receiving the award has the
right to vote the shares or to receive dividends or dividend
equivalents.
(c) Restriction on Transferability. None of the
shares or units of a Restricted Stock award may be assigned or
transferred, pledged or sold prior to their delivery to a
recipient or, in the case of a recipient's death, to the
recipient's legal representative or legatee or such other person
designated by an appropriate court; provided, however, that the
Committee may, in its sole discretion, allow for transfer of
shares or units of a Restricted Stock Award to other persons or
entities.
(d) Delivery of Shares. Upon the satisfaction of the
terms, conditions and restrictions contained in the Restricted Stock
award agreement or the release from the terms, conditions and
restrictions of a Restricted Stock award agreement, as determined by
the Committee, the Company shall deliver, as soon as practicable, to
the recipient of the award (or permitted transferee), or in the case
of his or her death to his or her legal representative or legatee or
such other person designated by an appropriate court, a stock
certificate for the appropriate number of shares of the Company's
Common Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.
(e) Forfeiture of Restricted Stock. Subject to Section
7(f), all of the restricted shares or units with respect to a
Restricted Stock award shall be forfeited and all rights of the
recipient with respect to such restricted shares or units shall
terminate unless the recipient continues to be employed by the
Company or its subsidiaries until the expiration of the forfeiture
period and the satisfaction of any other conditions set forth in the
award agreement.
(f) Waiver of Forfeiture Period. Notwithstanding any
other provisions of the Plan, the Committee may, in its sole
discretion, waive the forfeiture period and any other conditions set
forth in any award agreement under certain circumstances (including
the death, Disability or Retirement of the recipient of the award or
a material change in circumstances arising after the date of an
award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the restricted shares) as
the Committee shall deem appropriate.
Section 8. Adjustment in Event of Change in Stock. Subject
to Section 9, in the event of stock split, stock dividend, cash
dividend (other than a regular cash dividend), combination of
shares, merger, or other relevant change in the Company's
capitalization, the Committee shall, subject to the approval of the
Board of Directors, appropriately adjust the number and kind of
shares available for issuance under the Plan, the number, kind and
Option Price of shares subject to outstanding Options and Stock
Appreciation Rights and the number and kind of shares subject to
outstanding Restricted Stock awards; provided, however, that to the
extent permitted in the case of incentive stock options by Sections
422 and 424 of the Code, in the event that the outstanding shares of
Common Stock of the Company are increased or decreased or changed
into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation, through
reorganization, merger, consolidation, liquidation,
recapitalization, reclassification, stock split-up, combination of
shares or dividend, appropriate adjustment in the number and kind of
shares as to which Options may be granted and as to which Options or
portions thereof then unexercised shall be exercisable, and in the
Option Price thereof, shall be made to the end that the
proportionate number of shares or other securities as to which
Options may be granted and the optionee's proportionate interests
under outstanding Options shall be maintained as before the
occurrence of such event; provided, that any such adjustment in
shares subject to outstanding Options (including any adjustments in
the Option Price) shall be made in such manner as not to constitute
a modification as defined by subsection (h)(3) of Section 424 of the
Code; and provided, further, that, in the event of an adjustment in
the number or kind of shares under a Restricted Stock award pursuant
to this Section 8, any new shares or units issued to a recipient of
a Restricted Stock award shall be subject to the same terms,
conditions and restrictions as the underlying Restricted Stock award
for which the adjustment was made.
Section 9. Effect of a Change of Control.
(a) For purposes of this Section 9, "Change in Control" shall,
unless the Board of Directors of the Company otherwise directs by
resolution adopted prior thereto or, in the case of a particular
award, the applicable award agreement states otherwise, be deemed to
occur if (i) any "person" (as that term is used in Sections 13 and
14(d)(2) of the Exchange Act) other than a Permitted Holder (as
defined below) is or becomes the beneficial owner (as that term is
used in Section 13(d) of the Exchange Act), directly or indirectly,
of 50% or more of either the outstanding shares of Common Stock or
the combined voting power of the Company's then outstanding voting
securities entitled to vote generally, (ii) during any period of two
consecutive years, individuals who constitute the Board of Directors
of the Company at the beginning of such period cease for any reason
to constitute at least a majority thereof, unless the election or
the nomination for election by the Company's stockholders of each
new director was approved by a vote of at least three-quarters of
the directors then still in office who were directors at the
beginning of the period or (iii) the Company undergoes a liquidation
or dissolution or a sale of all or substantially all of the assets
of the Company. No merger, consolidation or corporate reorganization
in which the owners of the combined voting power of the Company's
then outstanding voting securities entitled to vote generally prior
to said combination, own 50% or more of the resulting entity's
outstanding voting securities shall, by itself, be considered a
Change in Control. As used herein, "Permitted Holder" means (i) the
Company, (ii) any corporation, partnership, trust or other entity
controlled by the Company and (iii) any employee benefit plan (or
related trust) sponsored or maintained by the Company or any such
controlled entity.
(b) Except to the extent reflected in a particular award
agreement, in the event of a Change of Control:
(i) notwithstanding any vesting schedule, or any other
limitation on exercise or vesting, with respect to an award
of Options, Stock Appreciation Rights or Restricted Stock,
such Options or Stock Appreciation Rights shall become
immediately exercisable with respect to 100 percent of the
shares subject thereto, and the restrictions shall expire
immediately with respect to 100 percent of such Restricted
Stock award; and
(ii) the Committee may, in its discretion and upon at
least 10 days advance notice to the affected persons, cancel
any outstanding Options, Stock Appreciation Rights or
Restricted Stock awards and pay to the holders thereof, in
cash, the value of such awards based upon the highest price
per share of Company Common Stock received or to be received
by other stockholders of the Company in connection with the
Change of Control.
Section 10. Amendment and Discontinuance. The Board of
Directors of the Company may from time to time amend or revise the
terms of the Plan, or may discontinue the Plan at any time as
permitted by law, provided, however, that such amendment shall not
(except as provided in Section 8), without further approval of the
stockholders, (i) increase the aggregate number of shares with
respect to which awards may be made under the Plan; (ii) change the
manner of determining the Option Price (other than determining the
fair market value of the Common Stock to conform with applicable
provisions of the Code or regulations and interpretations
thereunder); (iii) extend the term of the Plan or the maximum period
during which any Option may be exercised or (iv) make any other
change which, in the absence of stockholder approval, would cause
awards granted under the Plan which are then outstanding, or which
may be granted in the future, to fail to meet the exemptions
provided by Rule 16b-3 under the Exchange Act and Section 162(m) of
the Code. No amendments, revision or discontinuance of the Plan
shall, without the consent of an optionee or a recipient of a
Restricted Stock award, in any manner adversely affect his or her
rights under any Option theretofore granted under the Plan.
Section 11. Effective Date and Duration. The Plan was adopted
by the Board of Directors of the Company on January 25, 1996,
subject to approval by the stockholders of the Company at a meeting
to be held in April 1996. Neither the Plan nor any Option or Stock
Appreciation Right or Restricted Stock award shall become binding
until the Plan is approved by a vote of the stockholders in a manner
which complies with Rule 16b-3 promulgated pursuant to the Exchange
Act and Sections 162(m) and 422(b)(1) of the Code. No Option may be
granted and no stock may be awarded under the Plan before January
25, 1996 nor after January 24, 2006.
Section 12. Tax Withholding. Notwithstanding any other
provision of the Plan, the Company or its subsidiaries, as
appropriate, shall have the right to deduct from all awards under
the Plan cash and/or stock, valued at fair market value on the date
of payment in accordance with Section 5(b), in an amount necessary
to satisfy all federal, state or local taxes as required by law to
be withheld with respect to such awards. In the case of awards paid
in the Company's Common Stock, the optionee or permitted transferee
may be required to pay to the Company or a subsidiary thereof, as
appropriate, the amount of any such taxes which the Company or
subsidiary is required to withhold, if any, with respect to such
stock. Subject in particular cases to the disapproval of the
Committee, the Company may accept shares of the Company's Common
Stock of equivalent fair market value in payment of such withholding
tax obligations if the optionee elects to make payment in such
manner.
Section 13. Construction and Conditions. The Plan and
Options, Restricted Stock awards, and Stock Appreciation Rights
granted thereunder shall be governed by and construed in accordance
with the laws of the State of Delaware and in accordance with such
federal law as may be applicable.
Neither the existence of the Plan nor the grant of any Options
or Stock Appreciation Rights or awards of Restricted Stock pursuant
to the Plan shall create in any optionee the right to continue to be
employed by the Company or its subsidiaries. Employment shall be
"at will" and shall be terminable "at will" by the Company or
employee with or without cause. Any oral statements or promises to
the contrary are not binding upon the Company or the employee.
